A plan to transfer part of Des Moines teachers' pensions into the Iowa Public Employees' Retirement System this summer hit a snag that could derail the merger, at least for now.

The cost of transferring about 260 current Des Moines employees who are part of the Des Moines Teachers Retirement System would be too much, according to district controller Nicholas Lenhardt.

"We’re terribly sorry that this has been a roller coaster of an experience; we did not intend to continue to jerk (people) around," he said to about 200 people at East High on Monday.

The 90-minute meeting turned heated at times. Some spoke of a broken trust between the district and retirees, and others questioned why money should be taken out of their plan to benefit only a few hundred people.

Others recounted that, as young teachers, they were told their choice between IPERS and DMTRS were irrevocable — so why is it being reconsidered now?

“You can get mad. That’s OK, I respect that," Lenhardt said, adding that there was no intention to "pit" current employees and retired members against each other.

Buy Photo

A man speakers about the Des Moines Teachers Retirement System during a heated meeting at East High School July 9, 2018.(Photo11: Mackenzie Ryan / Des Moines Register)

District officials are now "regrouping" to see if there are other ways to make the transfer work. They'll meet with IPERS officials this week to discuss options.

"As of right now, we're in a holding pattern," Lenhardt said. "We're going to try to go back and have some discussions with IPERS about other possibilities."

The transfer was expected to be finalized this summer.

“I think they’ll have a hard time moving forward. The cost that IPERS wants is too much,” said Jim Tredway, a longtime teachers' retirement advisory committee member who resigned in May.

Retirees also voiced concerns about political support for public pension systems, including statewide systems such as IPERS, and their future. Lenhardt assured retirees that Des Moines' retirement plan is in "solid financial shape."

(Photo11: Getty Images)

Why is the DMTRS transfer to IPERS on hold?

A new actuarial study found the cost to transfer the Des Moines plan to IPERS increased from an estimated $66 million two years ago to $82.5 million in June.

Meanwhile, the Des Moines pension fund currently has about $236.8 million in total assets, down from about $245.1 million a year ago.

The increased cost, the decrease in total assets and other factors all mean the Des Moines pension would need to dip into reserves by about $7 million to make the transfer happen.

However, there's a clause in the pension's trust agreement that forbids doing that, Lenhardt said. The district could amend the plan with school board approval.

The district does not have $7 million in other funds that officials are willing to use to make the transfer happen.

"It's a pause," Lenhardt said. "There have been several pauses throughout the process. This is just the latest one."

Who would be affected by an IPERS transfer?

If the transfer goes through at some point, accounts of current DMPS employees with a DMTRS pension would be transferred to IPERS. Currently, that's about 260 people.

Former employees or retirees from Des Moines who are part of DMTRS — roughly 860 people — would not have their accounts transferred, Lenhardt said.

Retirees' benefits would continue to be guaranteed, as outlined in the trust, district officials said. Des Moine schools taxpayers would be "on the hook" to ensure that retirees receive the benefit, Lenhardt said.

Some argue that retired members could be affected, however, as dollars drawn from the Des Moines retirement plan belong to all its members and should not pay IPERS for only some to transfer.

About 30 people are on the cusp of retirement or decided to delay retirement because of uncertainty over which plan they are a part of.

"You're playing with people's lives," said Donald Butler, a current employee who delayed retirement.

What's the history of a DMTRS and IPERS merger?

Former Gov. Terry Branstad signed a law in 2017 allowing the transfer of the Des Moines school pension fund into IPERS.

The bill authorizes the Des Moines school board to adopt a resolution to authorize the merger; any change would need the approval of the school board.

“We knew we had to do something to this plan, because it wasn’t attractive (to new employees)," Lenhardt said, and having only a handful of new members a year wouldn't be healthy for the longevity of the plan. "We knew we had to make a change.”

IPERS is authorized by the Iowa Legislature, but not required, to accept the proposal to merge the plans.

Des Moines Public Schools initially explored a merger with IPERS at least two decades ago, and it has been under more recent discussion over the last few years.

Created in 1953, the Des Moines Teachers' Retirement System is the state's only pension program operated by a school district.